Calculate the rate at which a firm can grow without changing its leverage if its payout ratio is 70%,equity outstanding at the beginning of the year is $940,000,and its net income for the year is $162,000.

Name: Calculate the rate at which a firm can grow without changing its leverage if its payout ratio is 70%,equity outstanding at the beginning of the year is $940,000,and its net income for the year is $162,000.
Brand: Quizplus
Rating: 4.8 (46 reviews)

Question

Quizplus · Accepted Answer

Sustainable growth rate = (1 − 0.70) × ($162,000 / $940,000) = 0.0517, or 5.17%

Calculate the Rate at Which a Firm Can Grow Without